iSuppli: iPhone 4 Pretty Inexpensive to Produce

[Michael Essany]

Between iFixit's teardown of the iPhone 4 and iSuppli's subsequent analysis of the components, we're finally gaining some fairly telling insight as to how much it costs to physically produce a fourth generation iPhone. As you might expect, it isn't overtly expensive to manufacture Apple's updated smartphone.

As it turns out, the iPhone 4 costs approximately $200 to manufacture - $187.51 to be as close to "exact" as possible, according to iSuppli. Kevin Keller, who helped orchestrate the iSuppli analysis, tells Businessweek that "over the years, the iPhone has generally tended to hover in the $170-to -$180 cost range because Apple seems to be trying to hit some kind of budget." So, given Apple's penchant for buying in bulk - and not your Costco or Sam's Club definition of buying in bulk - Cupertino has managed to procure millions of little parts in a relatively "inexpensive bundle."

Keeping iPhone-part prices low helps Apple wring higher profit from its bestselling product, which made up 40 percent of revenue last quarter.

For the break down, iSuppli used a 16-gigabyte version of the iPhone 4. It should be noted, however, that the $187.51 cost of production estimate does not take into account some of the latent but still costly elements of iPhone production - like labor, advertising, shipping, etc. Not surprisingly, Apple isn't formally commenting on the findings and estimates presented by iSuppli.

Apple is currently peddling the 16-gigabyte iPhone 4 for $199, with the 32-gigabyte model going for $299 (with 2 year contract required). As Paul reported this morning on MMi, Apple says 1.7 Million iPhone 4s sold during launch weekend.

Image via iFixit

[tsatryan]

So, essentially, they are selling the 16 gig model at nearly cost (when subsidized by ATT) and the 32 gig for $100 more than cost. That is certainly not unreasonable at all by any standards. Usually, anything sold retail is double the cost of wholesale.

[shakalaka]

That's only with AT&T though. The cost of unlocked version here in Canada is expected to be around $649 for 16gig and $749 for 32.

[jguest]

"Apple is currently peddling the 16-gigabyte iPhone 4 for $199, with the 32-gigabyte model going for $299."

That quote is wrong. Apple is selling them for more than 199 and 299. AT&T are the one's selling them for $199 and $299 WITH contract. Might want to update that.

[Nehal3m]

That's only with AT&T though. The cost of unlocked version here in Canada is expected to be around $649 for 16gig and $749 for 32.

Agreed. Buying unlocked always cost a lot.

But, this is typically Apple. I remember the news about the cost of manufacturing Macs and other Apple products and the manufacturing cost was lower than the price Apple sells them for.

[akuamakana]

But, this is typically Apple. I remember the news about the cost of manufacturing Macs and other Apple products and the manufacturing cost was lower than the price Apple sells them for.

well thats how a successful company makes money. if you sell it for the same price youre gonna go nowhere.

[Garland106]

that the $187.51 cost of production estimate does not take into account some of the latent but still costly elements of iPhone production - like labor, advertising, shipping, etc. Not surprisingly, Apple isn't formally commenting on the findings and estimates presented by iSuppli.

LOL Chinese workers they pay them $1 a day labor is cheap

[eg6motion]

seems about right. ATT is eating the cost though, not Apple...although I am sure ATT is not buying those phones at full retail either.. but you can be sure that it's not the 199/299 price points they offer with contract.

[pm_kennedy]

Apple is probably making an average profit of about $400 per iPhone. (i.e. $600 selling price; $200 production cost). About $680,000,000 over this past weekend. Oh boy

[Shockster]

Agreed. Buying unlocked always cost a lot.

But, this is typically Apple. I remember the news about the cost of manufacturing Macs and other Apple products and the manufacturing cost was lower than the price Apple sells them for.

That's kinda how companies make moolah brah

[Poseidon79]

Yup... AT&T gives a $400 subsidy so the $600 16 GB iPhone costs $187 to manufacture. Decent margin

[RudeBoyBandit]

Everyone is forgetting to factor in more than just production cost. After production there's still, like the post mentions, advertising costs, packaging costs, labor costs, shipping costs and a slew of other things that will be paid per phone so Apple's/AT&T's profit per phone is much less than $400

[dougchapin]

I would be interested to find out if At&T actually does "pay" Apple $400/phone. Since we all paid taxes on $599/$699. if not, taxes are being collected unlawfully.

[unison999]

Everyone is forgetting to factor in more than just production cost. After production there's still, like the post mentions, advertising costs, packaging costs, labor costs, shipping costs and a slew of other things that will be paid per phone so Apple's/AT&T's profit per phone is much less than $400

$188 is the cost on parts, then figure $12 for each phone to do all the other stuff. so $200 total cost per phone $400 subsidized by AT&T is still quite a chunk of change Jobs is pocketing.

I would be interested to find out if At&T actually does "pay" Apple $400/phone. Since we all paid taxes on $599/$699. if not, taxes are being collected unlawfully.

Stores is reseller, if a chain have a store in your state they are legally suppose to collect taxes from you. As to collecting taxes on the actual retail price, that is what retailer is suppose to do even though they collect less than that. You signed into contract which will credit your account and automatically applied the $400 when you get an iPhone, which Apple gets their share every time you pay your bill until that $400 is paid to Apple. So in the end you do pay that $499 and $699 price for the phone, just that you are just paying a down payment in the beginning.

[scgmilan]

I would be interested to find out if At&T actually does "pay" Apple $400/phone. Since we all paid taxes on $599/$699. if not, taxes are being collected unlawfully.

You are a retarded. You get taxed on the sales price not on what AT&T pays.

You think when you buy a car you are getting unlawfully taxed too?

[rhekt]

So that comes down to about a 38.5% price increase. Hmm. Pretty decent I'd say.

[NetMage]

Some of you may want to educate yourselves (ever hear of Google) before accusing - California reportedly requires sales tax on the unsubsidized phone price regardless of purchaser out of pocket at time of sale.

[unison999]

So that comes down to about a 38.5% price increase. Hmm. Pretty decent I'd say.

No, most products companies do at least 100% markup.
$200 cost of the phone, end user would end up paying $599 for this phone when 2 year contract is up. Which goes to Apple (AT&T make money on the phone service), and Apple will also take in percentage of the monthly service of phone and the data plan. That is quite a big chunk of change.

[Blowfish64]

You are a retarded. You get taxed on the sales price not on what AT&T pays.

You think when you buy a car you are getting unlawfully taxed too?

A retarded? Ouch! The sting of irony

[JerichoEvanMartin]

Kind of a huge difference in prices. I think the actual device should be around 250 bucks at most.